Hospital Negative Margins: How Essential Will Business Expertise Become For the Director of Surgical Services?
Hospitals continue to feel the heat of the COVID pandemic emotionally and financially, with negative margins being the norm throughout 2022. According to a recent Kaufman Hall report, some contributing factors included increased costs for employed staff, contract labor, supplies, purchased services, and medications.
Now officially in 2023, the outlook is essentially unchanged. Larger for-profit systems will have an easier time, but smaller organizations will still struggle especially rural hospitals.
What will this mean for a newly hired Director of Surgical Services? Our 40 Fast and Future Leaders of Surgical Services, class of 2022 winners give answers to this question: will business proficiency soon become a requirement for Directors of Surgical Services?
Brittney Williams, BSN, RN
Administrator, Park Central Surgery Center, Dallas, TX
“I think it’s already a major job requirement. If you’re not paying attention to your ROI for supplies, implants, and equipment, you’re doing a disservice to your team and your company. Doctors will tell directors, “I need this, I need that.” But you must take a step back and consider what that does to the budget. Is it going to increase the quality of care or efficiency of care? How long will it take for us to recoup that if it’s a capital expenditure or a monthly recurring one? Directors should also keep an eye on the payer mix for the facility. When you’re looking at how long it will take to recoup the money for purchased equipment, what does that look like at your specific facility? Do you have a high volume of Medicare patients, or do you have a higher volume of commercial patients? For each one, your reimbursement is going to be completely different.
I had a CFO famous for saying that if there’s no margin, there’s no mission. And I think that rings true for all of us because if we don’t make money, we can’t continue to take care of patients, which is what we all want to do.”
Cera Salamone, MSN, RN, NE-BC, CNOR, HACP
Director of Perioperative Services, City of Hope Medical Center, Duarte, CA
“The periop director needs to balance the clinical components with the business sense and ensure that the clinical quality is uncompromised. We have to be able to speak and explain the clinical side to the finance people with confidence and competence. Also, we have to get the staff to understand the business side, so they know the ‘whys’ behind the ‘whats.’”
Gregory Koulisis, MSN, BSN, RN
Director of Surgical Services, Beth Israel Deaconess Medical Center, Boston, MA
“Once you become a director of any type of department or unit within a healthcare setting, it’s crucial that you have a basic understanding of margins, revenue, and spreadsheets. If you don’t, that’s okay, but you need to find your partner within your organization who can help you understand.
For example, interpreting numbers for forecasts can sometimes help you make better decisions on what type of products you need and what you don’t need. You get those forecasting reports and see you have a par level of 35 of a product on the shelf, but we’re only stocking every three months. That’s a low utilization rate. It’s a product you want to think about getting rid of or identifying another product that can be used in the same manner. You have possible cost savings there.
Depending on how your system is set up, you may have a business partner like a perioperative business director or a senior business manager. Building those relationships and understanding those concepts is even more important. Not necessarily coming in and having it all under your belt, but having the motivation to learn. There are a lot of online programs out there, free classes, from project management to Excel spreadsheets (you definitely need to know how to create and filter formulas in there).
Then as you get more invested in your career, you can take on a higher level of education through a certificate program, whether from a community college or an ivy league school like Wharton Business School.”
Leiran Cornish, MBA, RN, BSN
Nurse Manager of Perioperative Services
“I would agree that it is, especially if you’re in a structure without a business manager or director in place. Having that financial understanding of basic finance, accounting, and economics, would go a long way. That’s part of the reason why I pursued my MBA. I wanted to grow my career, but also those classes opened my mind. I could pick up on and understand more of the conversations being had in capital cost meetings.”
Monique Freymuth, BSN, RN
Interim Director of Surgical Services
“Business and financial management is an essential part of our role. I think as nurses, at least for myself, those things are not ingrained. It’s not something that you’re trained in. You have to figure it out as you go or have mentors to help you learn that skill set. There is a lot of pressure on leaders now because hospitals have taken a hit.”
Robert LeBlanc, RN
Clinical Nurse Manager, North Oaks Health, Hammond, LA
“Certainly, learning how to function leanly through programs such as Lean 6 Sigma is more important now than ever in the operating room. Doing more with less and making up for some of the losses we incurred during COVID will be extremely important moving forward, but also setting the tone for what we can accomplish in the coming years. Our current director here has a business degree, and she’s wonderful. She’s been very helpful, mentoring me on the business aspects of the OR. Coming from a staff nurse position, we don’t see a whole lot of that side of it.”